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What Is a Term Life Insurance Policy?

 


What Is a Term Life Insurance Policy? Many insurance products are about protecting yourself against the unforeseeable. Life insurance is about protecting your loved ones when the inevitable happens. Term life insurance is one kind of life policy that can provide that kind of financial protection.

Term life insurance is a type of life insurance policy that has a specified end date, like 20 years from the start date. The death benefit will only be paid out if the policyholder dies during the chosen term. The death benefit is the amount of money that will be paid to the beneficiary when the policyholder passes away. The most common type of death benefit for a term policy is a level term policy, which means that the value of the death benefit stays the same for the entire time your policy is active. The benefit can also be decreasing, meaning it shrinks over time, typically in one-year increments.

Some term policies can also be converted to a permanent life insurance policy without a medical exam, like whole or universal life insurance, once the term is up. However, once converted, those permanent life policies are more expensive. According to the National Association of Insurance Commissioners (NAIC), some term policies can also come with a return of premium features. That means that if a death benefit isn’t paid out by the end of the term, you’ll get back all or part of the premiums you paid. However, this is a more expensive option.

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